Russia is increasing its domestic borrowing amid rising expenditures and a budget deficit
The Russian Ministry of Finance is increasing the volume of domestic government borrowing amid a sharp rise in military spending and a widening federal budget deficit. This was reported by the Foreign Intelligence Service of Ukraine.
According to Ukrainian intelligence, Russia’s military spending increased by 30% year-over-year in the first half of 2026.
At the same time, from January through July, the Russian Federation’s federal budget deficit grew by 40% compared to the same period in 2025.
Against this backdrop, Moscow began to raise funds more actively through domestic government debt.
On September 2, the Russian Ministry of Finance resumed large-scale issuance of federal bonds, which had effectively been suspended since mid-July.
According to the Federal Treasury, government bonds with a nominal value of $11.55 billion were placed during one of the auctions. As a result, $10.84 billion was raised for the federal budget.
“Against this backdrop, on September 2, the Russian Ministry of Finance resumed large-scale placements of federal loan bonds (FLB), which had effectively not been conducted since mid-July. During the auction, government bonds with a nominal value of $11.55 billion were issued. As a result, $10.84 billion was raised for the federal budget,” the SZR statement reads.
At the same time, the Central Bank of Russia expanded its support for the banking system.
According to the FSR, the regulator provided Russian banks with $10.84 billion secured by securities—roughly the same amount that the Ministry of Finance managed to raise from the placement of government bonds.
“The regulator provided banks with $10.84 billion secured by securities—an amount comparable to the funds received by the Russian Ministry of Finance from the placement of government bonds. This situation indicates a growing dependence of budget deficit financing on the Russian Central Bank’s ability to maintain the banking system’s liquidity and ensure demand for government debt securities,” the Foreign Intelligence Service noted.
Thus, the financing of the Russian budget deficit is increasingly dependent on the domestic debt market and the Central Bank’s ability to maintain bank liquidity.
The Foreign Intelligence Service also forecasts a further increase in the Russian budget’s financing needs.
According to Ukrainian intelligence estimates, by the end of 2026, the Russian Ministry of Finance will likely have to raise an additional $23.1 billion to $34.6 billion to cover part of the additional budget expenditures.
Consequently, increased military spending and a growing budget deficit are forcing Russia to ramp up government borrowing more aggressively, while simultaneously strengthening the Central Bank’s role in sustaining demand for Russian debt securities.
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